Illinois Smoking Ban Loophole? Casinos Could Be Exempt

05/10/2011 03:35 pm ET | Updated Jul 10, 2011

HAMMOND, Ind. — Clutching his Marlboro, Clifford Hutchison works a slot machine unaware of his role in a desperate competition to balance state budgets.

The retired maintenance worker from Chicago could have sought his fortune at any of the casinos in northeastern Illinois. But he decided to drop his quarters at the Horseshoe Casino in Hammond, Ind., partly because that state allows gamblers to light up unhindered – something Illinois has banned since January 2008.

"It relaxes me," he said of smoking and gambling.

Some lawmakers would like to lure Hutchison and his cigarettes back to Illinois. As cash-strapped governments grasp for every quarter, the state is among several contemplating loopholes in smoking bans to keep more gamblers – and their money – from slipping across the border.

An Illinois Senate committee could deliberate Wednesday on a bill to allow smoking in casinos so gamblers don't escape to Indiana, Iowa and Missouri.

Casino owners blame the bans for the loss of millions of dollars in revenues and the subsequent fall in tax receipts. The American Gaming Association estimates that about 20 percent of casino patrons smoke.

But gambling and smoking opponents say the loss claims are exaggerated and that the loopholes are bad public health policy. The Illinois bill passed the House 62-52, but faces stiff opposition from key senators and Gov. Pat Quinn.

"It's discrimination against the people who work in casinos," said Kathy Drea, vice president of advocacy for the American Lung Association in Illinois. "They're saying their health isn't worth the same as everyone else's."

The Illinois bill tweaks the 2008 ban by permitting smoking in casinos as long as it's allowed in neighboring states. State Rep. Dan Burke, a Chicago Democrat who sponsored the bill, voted for the smoking ban, but said "unintended consequences" warrant an amendment.

Burke dismissed the notion that his bill would backtrack on efforts to discourage smoking, saying it is purely a matter of dollars and cents. Even after lawmakers passed a 67 percent increase in income tax in January, Illinois still faces about a $9 billion budget deficit.

"It's a money bill," Burke said.

Casino operators and other backers of the bill point to studies from 2008 and 2009 showing what they purport to be the ban's negative effect on business. While also noting the overall economic slump, the American Gaming Association, the Illinois Gaming Board and the Federal Reserve Bank of St. Louis each reported that casino receipts in Illinois fell by about 20 percent in 2008 – the year the ban was passed. The Illinois Gaming Board said the state's share of taxes dropped 34 percent to $473 million that year.

Receipts at Illinois casinos were down 3.9 percent last year to $1.37 billion.

A Federal Reserve Bank report in mid-2009 says the smoking ban cost Illinois' gambling halls as much as 22 percent in revenue in 2008, while revenues surged roughly 2 percent in Iowa and Missouri and remained flat in Indiana. Attendance at Illinois' casinos slumped 12 percent but neighboring states saw far smaller declines.

The Illinois Casino Gaming Association's Tom Swoik estimates that the state taxes casinos would have paid are down $771 million over three years. He said casinos would accept an exemption that allows smoking on the gambling floor but keeps restaurants and bars smoke-free.

Anti-smoking activists including Drea note that other factors helped one Illinois casino out-earn its competitor across the Mississippi River in Iowa, where smoking is allowed.

In January 2008, the Rhythm City casino in Davenport, Iowa, had twice the casino receipts of Jumer's Casino and Hotel in Rock Island and the Isle of Capri in nearby Bettendorf had more than three times. But the Rock Island site outstripped its Iowa neighbor when it opened a new casino at the end of that year and just barely trailed the Isle of Capri. In March, the Illinois casino posted receipts of $7.65 million compared to $4.76 million in Davenport and $7 million in Bettendorf.

"They're a brand-new casino and people tend to go to something new," said Wes Ehrecke, president of the Iowa Gaming Association.

It's unclear whether the casino exemption will get anywhere in the Illinois Senate. President John Cullerton sponsored the statewide smoking ban and is "wildly opposed" to adding exemptions, but promises to give the measure "due consideration,' according to his spokesman John Patterson.

Quinn doesn't support it, noting how it's a reversal of state health policy.

"I don't think we should go backwards," he said.

Iowa's statewide smoking ban excludes its state-regulated gaming floors and tribal casinos. Ehrecke said revenues would drop 20 to 30 percent, costing the state $60 to $90 million in tax revenue, if the state were to suddenly ban lighting up on the gaming floors.

Similar concerns are playing out in South Dakota, where voters approved a statewide smoking ban last November. Casino operators complain that it has doused demand for video lottery in North Sioux City – one of the state's biggest revenue sources – by pushing gamblers to nearby Sioux City, Iowa, where they can puff and play.

At her Beano and Sherry's Casino in North Sioux City, Sherry LaFleur said business has fallen 33 percent since the law took hold – and such drop-offs are catching lawmakers' attention. The law also is being challenged in the courts.

According to the South Dakota Lottery, video lottery revenues from the time the ban took effect through mid-April were $78.9 million, down 17 percent during the same period a year earlier. The state is supposed to get half.

Kansas left a gamblers' loophole at state-owned casinos in its statewide smoking ban last year. A repeal of that ban has been proposed, but seems unlikely to pass.

In the St. Louis metropolitan area, a half dozens casinos compete for business, including the Casino Queen in East. St. Louis, and another upriver in Alton, Ill.

The Casino Queen's operators say they've lost about 20 percent of revenues since the Illinois ban took effect. They also weren't helped by the opening of the towering Lumiere Place casino and hotel directly across the Mississippi in St. Louis, as well as another Missouri casino where smoking is allowed.

"We're certainly not pointing to smoking as the (sole) reason for the status of our business," said Jeff Watson, the general manager. But if Illinois reversed course, "it would be highly unlikely a certain segment of our players would drive by us (into Missouri) if they could smoke here."

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Jim Suhr reported from St. Louis.

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